Thursday, September 06, 2007

Managed Services in a Month - Part Three

[ KP Note: The entire "Managed Services in a Month" series has been collected, collated, and indexed. Still free. You may access it now at http://www.greatlittlebook.com/Seminars/managed_service_in_a_month.htm. ]


Context: This post follows on the previous three.
Start at http://smallbizthoughts.blogspot.com/2007/09/managed-services-in-month.html and work your way forword from there.
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Today's Topics: Weed Your Client Garden and Finish The Plan

See also the post at http://smallbizthoughts.blogspot.com/2007/08/weeding-your-business-garden-part-2.html.

Where we've been:
- Topic One: Start making a plan
Sub One: Rules / Policies
Sub Two: Know What You Know
- Topic Two: Create a three-tiered pricing structure

Now, here's Topic Three: Weed Your Client Garden.

That means you're going to draw some lines, set some rules, and probably drop a few clients.

It's possible that you won't drop any clients. But the process is still useful because you need to know that you want to keep those clients!

Revisit the Plan

We started out by starting to work on a plan. Since then you've learned a lot about where your money comes from, the services you offer, and what you want your clients to look like.

I hope by now you've finalized that Pricing Sheet with the three tiers. Get some good 24 lb. paper and print it in color. Eventually, when you're totally convinced that it's set in stone (for the next 12 months anyway), you can print some at Vista Print on nice paper.

Your pricing sheet is really a summary of what you offer and what it costs.

So now let's take our first stab at guessing what your clients will do.

First, do you have any client that you just plain want to get rid of? Maybe they don't pay on time. Or every little visit turns into a major (unprofitable) project. Or they're not nice to work with.

Whatever. That's easy. Write a letter and tell them that you can't provide them technical support anymore. If you feel you can hand them off to another consultant with a good conscience, do so.

Second, make three sets of lists. You guessed it: Platinum, Gold, and Silver. Now try to guess which agreement each client will sign, based on past performance.

Don't forget: Past performance is no guarantee of future results.

We were pleasantly surprised at some of the clients who signed when we thought they'd leave. But, hey: if they're willing to play by the rules you set out on your price sheet, then they're certainly welcome, right?

Keep this list. We'll come back to it in a couple of days. For now, just try to firm up who you think will sign at each level, and the probability they they will do so.

Now rethink that plan again. Does it feel right? Have you defined the clients you want to keep, and built a system around them? Is the pricing good?

Note: If you've given any passing thought to raising your rates in the last year, that's a good sign that it's over-due. So you need to raise two rates. The non-contract rate and the preferred rate your clients get when they sign a service agreement with you. Since no one will ever be charged the non-contract rate, make it whatever you want. If the norm in your city is $125, make it $150. Then you can make the preferred rate $135.

If you think the clients will resist, ASK THEM. Don't have both sides of the conversation and guess what your clients will think: Let them participate in their half of the conversation.

Anyway, set your rates.

Now you've defined who you are, what you offer, who your clients are, the services you sell, and the prices you'll charge.

And that, in a nutshell, is what goes into your service agreement!

[ Note on Poverty ]

You don't need every penny. You just don't. Very small consultants start out taking every dollar and every job they stumble across. But you don't have to stay that way.

Maintaining any client has overhead. It takes time to send out invoices. And when a critical system you're responsible for goes down, you need to attend to it, even if the client buys $500 worth of labor in a year.

As you move forward with managed services, you will have scheduled work (what a concept) and big-paying clients who rely on you. Don't put yourself in the position of having to leave a $1,000/month client to run after a $500/year client because something broke.

At the same time, you can't drop this guy when he calls and says the server's smoking. You need to pass him off before that, so that when he needs help, he has someone to call.

Remember in Part One when we ran the reports (see section called Know What You Know About What You Sell)? Go get those reports.

On the list of clients sorted by labor sales/year, draw a line at $500/year. Draw another line at $1,000/year. How many clients are below $500? How many are below $1,000?

More importantly, how much money is above each of these lines? That is, how many tens of thousands of dollars come from clients that are worth more than $500 or $1,000 per year?

Most consultants have a few anchor clients and lots of smaller clients. If you dropped all the tiny clients, you would have a lot of hours to sell to your higher-end clients.

Know What You Know About What You Sell. You don't need every penny that walks in the door.

[ / note on poverty ]

Now, Topic Four: Finish The Plan!

Finishing the plan is simple: Tell someone about it.

Start with one of your technicians. Or your spouse. Or a favored client. Or another consultant.

Explain what you want to do. Sounds simple. Trust me, it's not.

Why do you want to make these changes? How does the client benefit? Why can't I get free network support on the Gold plan? Why does everyone have to prepay? Why are prices going up? Do you have to install something on every computer? Is this a promise about what I'll pay each month?

I hope you get the picture.

You've been mostly living in your own head about this project. Telling someone else makes it more real, and exposes you to all the questions you're going to get. It actively pulls all these pieces together at one time and forces you to see the big picture.

Plus, as you may know, teaching someone else is the best way to make sure you have mastery of a subject. Plus, when you answer a bunch of questions from someone who's not inside your head, they'll point out (perceived?) inconsistencies you'll need to address.

When you master the understanding of your new Managed Services offering, then you'll be able to whip out a service agreement in no time at all.

And that will be our next topic.

Homework: If you haven't somehow acquired a sample Service Agreement or two, your work will be a lot harder. I'm not telling you to go buy my book. But get something.

If you've been following this series, then things are moving at a nice pace. Keep it up. Don't Stop.

If you have to write a service agreement from scratch, that will cause a major delay in your progress.

Remember, you're going to sign at least one agreement by the end of September. With luck you'll sign five or ten!

But not if you don't have an agreement.

So you go do your homework and get ready for Part Four in the series.

4 comments:

  1. Karl,

    Great article keep the good work coming.

    What's you preference when presenting your plans to your potential client do you give them a lump sum proposal based on their network, ie plan A is $500/mo B is $1000/mo or do you break out the pricing per workstation/server etc.

    ReplyDelete
  2. Thank you.

    Our plan is based solely on number of servers and workstations. If it's server only, our current price is $500/mo.

    Servers with workstations (gold or plat), the server goes to $350/mo.

    Gold covers workstations at $45/mo. remote only.

    Platinum covers workstations and the network for $60/wrkstn/mo.

    I agree with Erick on most things, but I'm just stuck on a per-device mentality.

    ReplyDelete
  3. Karl, thanks for all the tips, I'm following along in the game and have most items ready to go.
    I have some questions that slowing me down at this point...
    Do you charge $500.00 per server in the bronze, and $350.00 per server in the other level. Or are multiple servers priced at different price points?

    ReplyDelete
  4. I hope you know that you shouldn't just duplicate my pricing. That might not be right for your market.

    We charege $500 for the first server on Silver and $350 for additional servers. All servers must be covered.

    On other plans, all servers are $350, even the first

    ReplyDelete

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